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tv   Nightly Business Report  PBS  August 22, 2012 6:30pm-7:00pm EDT

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>> this is n.b.r. >> tom: good evening, i'm tom hudson. the federal reserve is close to taking action to boost the economy, as soon as september. >> susie: i'm susie gharib. home sales are picking up, and business is back at luxury home builder toll brothers, we speak with its chief financial officer. >> tom: shares of hewlett- packard rise tumble the closing bell, despite soft computer sales. >> susie: that and more tonight on "n.b.r."! >> susie: a new dose of stimulus to boost the economy could be in the works. that's what federal reserve policymakers talked about at their july meeting, according to
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minutes released today, here's what they said: "many" fed members supported more "quantitative easing", or what's commonly called qe-3, "fairly soon" unless the economy improves "substantially." several members noted the benefits of waiting for more information to clarify the economic outlook. and policymakers agreed to defer their decision until the next meeting on september 12. those minutes triggered an immediate move in the markets, as stocks trimmed their losses. by the close, the dow lost about 31 points, but the nasdaq rose more than six and the s&p added a fraction. >> susie: fed chairman bernanke is expected to clarify his views on august 31, he'll be speaking at a fed conference in jackson hole wyoming. so, what does all this mean for the economy and the markets. we turn to two experts to answer that: brian wesbury, chief economist at first trust advisors and john manley, chief equity strategist at wells fargo advantage funds.
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gentlemen, thanks for joining us. let me begin with you, brian. is more fed stimulus coming, and what does fairly soon mean in fed-speak? >> yeah. well, it can mean anything. they have been saying fairly soon now for almost the past year, susie. people have been talking about this the qe-3. i personally don't think it's coming. one of the key reasons is this meet, the minutes were released. it was about two weeks ago, and that was before the employment report, which was much stronger than expected, before a very strong retail sales report, and before a very song industrial production report. so, the economy has gotten better, and as a result, i don't think the fed is going to have the justification that it wants to do another round of quantitative easing. >> susie: john, do you agree, is the economy doing good enough on its own that it doesn't need any action from the fed, what do you think? >> i'd like to think so. i think the numbers were better,
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i don't think i could characterize them as strong. you know, i think it's obviously better for things to be natural. the economy is doing better on its own, i don't see why the stock market should be disappointed over the long term. however, i think the fed will do whatever they have to do when they think they have to do it. >> susie: so, brirns let's say that the fed does it. what's in the harm in that? wouldn't that help a little bit for businesses, and for the economy? >> you know, suesy, i might agree with that, if i thought that the problems in our economy were caused by the fed in the first place. and in other words, really the only thing the federal reserve can do is keep interest rates low and print more money, give us more money in the economy, and right now, short term interest rates are as close to zero as we have ever seen in our lifetimes. they're the lowest they have ever been. and there's money everywhere. everyone talks about how much money is on corporations' books, and if you look at the m-2 or
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m-1 money supply growth number, they're all doing really well. the problems with the economy are not because we don't have enough money, or because interest rates are not low enough. our problems koom from somewhere else, and for that, i would look at government spending. government regulations. the threat of future taxeses. that's where i think our real problems are. >> susie: let's get some sense of what's going to happen in the markets, john. if the fed does put more stimulus into the economy, does this change things up for investors? >> i don't think over the long term it does. i think it probably helps the market somewhat on the short term basis. i still think we're near the top end of the trading range. my suspicion is that some of the move in august was a little bit of an anticipation of this. i think long term we're fine but i don't think short term this is a tremendous boost. >> susie: all right, and brian, we are all waiting to hear what chairman -- fed chairman ben bernanke is going to say on
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friday, next friday at the jackson hole conference. what do you think he's going to say? >> i think what we'll hear is more of basically what the minutes said today and what the fed has said almost over the past year and that is we're watching the economic data closely. if things stay slow, we'll do something else. if things pick up, we're not going to do something else. and this has gone on for about a year and it looks to me as if the data now is picking up. you know, oil is at $97 a barrel. gold is at $1650 an ounce. housing prices are now starting to come up. it appears to me, if i were the fed, i would look at those things and say, there's plenty of money in the system. what the economy really needs is something that we can't give it, unfortunately, people in washington, they -- d.c., they don't want to do that. they want everybody to believe that they're the cause of growth, that they're the savior of the economy. i wish that the fed would get out of that game.
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>> susie: i have a quick answer from john. what are the markets expecting to hear from bernanke? >> i think that he's ready to do whatever has to be done. i think they need some sense of support from the fed. that doesn't mean action, it just means they're there if it's needed. >> susie: all right. we'll leave it there. thank you so much, gentlemen. brian wesbury from first trust advisers and john manly from wells fargo advantage funds. >> reporter: i'm erika miller in new york. still ahead, bidding wars have returned to new york city and elsewhere. i'll tell you what that means for the housing market. >> tom: greece wants more time to cut its government deficit. the country's prime minister began a series of meetings today with european leaders, hoping to build support for a plan giving it two extra years to cut its red ink. in athens today greek prime minister antonis samaras met with eurogroup chair jean-claude juncker. junker said any easing of greece's bailout terms would depend on a report by
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international debt inspectors due out next month. the meetings continue friday with german chancellor angela merkel, today the greek leader told germany's most read paper, all that we want is a little breathing room to get the economy going and increase revenue... more time does not automatically mean more money. samaras will also meet with france's president on saturday. president france's president held a conference call with his british counterpart, david cameron and issued a statement saying both welcomed the actions of the ecb and agreed this did notny gait the need for greece to stabilize their own economy and prevent any further detrimental effects to the wider eurozone but they didn't specify which ecb actions they welcomed.
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>> susie: another vote of confidence today for the housing recovery. americans bought more homes in july than they did the month before. that's surprising, because july is usually a slow month for real estate sales. existing home sales rose 2.3%, thanks to low mortgage rates and a pick up in the labor market. the number of unsold homes has been steadily falling this year, and now stands at a 6.5 month supply. that's almost a healthy level. erika miller reports. >> reporter: good luck finding a family-size home for sale in manhattan these days. good luck finding any size apartment, for that matter. >> what we're finding is there has been no inventory. all year. and through the summer, there's pent-up demand. people are wanting something. as soon as something hits the market, people run out and see it. and the little inventory that there is, is getting sold
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immediately if it's priced right. >> reporter: new york city has seen a 17% drop in housing inventory in the past year. but the declines in phoenix, san francisco, los angeles and miami have been at least twice as big. and you know what that means: >> the pent up demand is so high that there are bidding wars. we're not seeing the bidding wars that we saw in the heyday, you know. we're not seeing bidding wars where it's hundreds of thousands of dollars over. but we are absolutely seeing multiple bid situations. >> reporter: the psychology of the housing market appears to be shifting in many parts of the country. the return of bidding wars and rising prices has many potential homebuyers optimistic that now is a good time to buy. the median existing home price in the u.s. is now about $187,000, up nearly 10% from july of last year. but there are still risks that could derail the real estate recovery, including near-record
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levels of foreclosure inventory. currently, there are about 1.4 million homes in the u.s. at some stage of the foreclosure process, virtually unchanged from a year ago. that level represents roughly 3.5% of all homes with a mortgage. and the picture could get worse. a huge number of foreclosures were put on pause during the robo-signing scandal. but since the settlement was finalized in april, there have been expectations another wave of distressed homes will soon hit the market. some economists aren't worried: >> we will see more foreclosures happen. there's many in the pipeline. there will be a pretty steady stream going forward. but we think that will be more than offset by sales. sales are improving, along with job and income growth. and we think that's more powerful. >> reporter: speaking of sales, if you're interested in buying the five bedroom brownstone we showed you at the top, as of today, it's still available, asking a mere $9 million.
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erika miller, "n.b.r.," new york. ueorrnep d ris t monthly government report is due out tomorrow but we have heard some optimism from a higher-end home builder today. toll brothers builds luxury houses in 20 states including some of of the hardest hit by the housing collapse. they earned 26 cents per share and orders jumped 27% and the number of home contracts cancelled fell. the company goes so far as saying it has seen the most sustained demand we have experienced in over five years. martin connors is the chief financial officer at toll brothers. he joins us from pennsylvania. marty, is the housing recession officially over now? can we call the bottom? >> we believe it is. i think we have seen a long and strong spring selling season. normally, it runs from the super bowl to easter, and we're still talking about it right now. our non-binding deposits through august were up nearly 60% over
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the prior august. >> that bodes well for the current quarter. you build in the northeast, mid-atlantic, southeast and the west coast. where are you seeing the strongest demand? >> our strongest market right now is the urban new york products we have. that's hoboken, brooklyn, manhattan. but we're pleased to be concentrated with 50 to 60% of our business between boston and washington, d.c. that is a healthy market for us. texas, we are -- where we are, which is dallas and houston is strong for us. detroit has come back a little bit. we have seen recovery in many markets, california is strong for us. >> tom: i was going to ask you about the sand state, california, nevada, florida. hit really hard by the housing collapse, obviously. >> well, i think nevada still has some work to do. phoenix has been surprisingly solid for us this year.
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i think in california we're fortunate not to be in the elan empire and the central valley. we're in the coastal areas in san diego, san francisco, and los angeles, and our products have done well. >> tom: speaking of products, your sock for shareholders has done very well. its highest price today since 2007, a nice rally on the heels of your optimism. how does today's market compare to 2007, the last time you saw toll brothers share price in the $33 range? >> i think the trend is up right now. in 2007, i think it's fair to say the trend was down. remember, 2007 was the year after the industry had built 2 million homes in 2005-2006. right now, we're building as an industry somewhere in the neighborhood of half a million homes a year. so, the industry built a million-and-a-half homes for 40 straight years. we expect it to get back there. starting from the current base of 500,000 we have significant
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optimism there's going to be growth. >> tom: i'm curious, marty, how are buyers buying from you. how much are they financing? how much is cash? you know, where are the resources coming from? >> our buyers have excellent credit scores. 760 average credit scores. about 80% our buyers take a mortgage, you know, 16, 17, 18,% of them pay with >> tom: okay. >> so, when our buyers take a mortgage with a 760 fica score, they're having no trouble getting the mortgage and in fact they're putting 30% down because in the affluent market we serve, they do have some capital to deploy in their purchase. >> tom: selling price of $500,000 or $600,000 for the toll brothers homes. it's the cfo of toll brothers marty connor, along with us. thank you, martin.
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>> susie: an update on the landmark patent battle between apple and samsung. jury deliberations began today in the three week trial. the american tech giant is demanding $2.5 billion for stealing its designs, while samsung is countering with almost $400 million. it's charging that apple is illegally using its technology. apple's stock ended the day up almost 13%, at just under $669 a share. if the jury finds either company guilty, they could face a ban on sales. hewlett-packard c.e.o. meg whitman, says her company is, "still in the early stages of a multi-year turnaround," the comments come as the computer maker posts a near $9 billion
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loss after writing off its purchase of e.d.s., saying it paid too much for the firm. but ex-out that $9 billion charge, and the computer maker's latest numbers beat estimates. h.p. earned $1 a share, $0.02 ahead of analyst estimates. motley fool's andrew tonner says times have changed, and consumers just don't want p.c.'s. >> this is going to be a multi- year process, people need to realize there's going to be a lot of innovation that has to happen in order for h.p. to survive in what we call the post p.c. world. we saw really challenging numbers for them in terms of desktop sales and that's just going to be the new reality for them. tablets are the new norm. >> susie: tom, h.p. stock rose more than 4% in after hours trading: up 4% to about $20 a share. that reversed losses in the regular session, where shares ended down about 4%. >> tom: let's get going with tonight's "market focus."
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>> tom: a mixed day for the major stock indices as they pared back earlier losses after indications the federal reserve may provide more help to the economy soon. you can see the impact of that optimism on the daily chart of the s&p 500. the federal reserve minutes were released in the two o'clock eastern time hour, when the index cut its losses and moved into positive territory, ending with a fractional gain. trading volume dropped slighting from yesterday. 599 million shares on the big board. just under 1.5 billion on the nasdaq. expectations of more assistance from the central bank was reflected in the stock sector performance. the economically-sensitive materials sector gained 1%. the worst performer was the industrial sector, down 0.4%. energy prices continued climbing. the prospects of more stimulus could increase energy demand. oil settled over $97 per barrel it's highest close since mid- may. prices are up 20% since their low in late june.
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earlier we spoke with the chief financial officer of homebuilder toll brothers. it's strong earnings report helped lift the sector. d.r. horton rallied 4.1%, pulte group rose 3.9%, and lennar gained 3.8%. these may be moving tomorrow as well when the monthly new home sales data is released. a strategic tie-up in the financial industry today. e-bay's paypal electronic payment system has a deal with discover financial to issue payment cards. it gives paypal access to millions of stores over discover's payment network. paypal already accounts for almost half of e-bay's revenue. e-bay shares were up 2.5%, closing at a new 52 week high. discover saw a 3.8% pop, also hitting a new 52 week high. the deal gives discover the potential to generate revenue for paypal by using its payment network. there was a more traditional buyout offer in the health care real estate business, focused on senior livg properties.
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health care reit has offered to buy sunrise senior living. the price is $845 million, or $14.50 per share. sunrise senior living stock jumped almost 60%, closing just below the offer price. this is a four year high. the proposed buyer, health care reit fell 2.7%, falling to a two month low. susie reported the hewlett packard quarterly earnings a moment ago, the regular session saw dell shares see heavy selling. l dell reported disappointing results last night, and a disappointing outlook. the stock fell 5.4%. volume was four times average. the stock closed less than one dollar away from a multi-year low. several analysts cut their price target for dell in light of it lowering its financial forecast. after the close tonight, clothing retailer guess warned investors its third quarter results will be disappointing. the warning came after guess reported slightly disappointing
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second quarter rests. after closing up 1.3%, shares fell as much as 16% after the warning tonight. that took the stock below $29 per share after closing the regular session around $33.50. a mixed finish for the five most actively traded e.t.f.'s. the losers were the financial sector fund, and the russell 2000 fund. and that's tonight's "market focus." >> susie: that fiscal cliff we've been telling you about now
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looks to be even steeper than we thought. the congressional budget office warned today that the big tax increases and spending cuts that make up the fiscal cliff will lead to a "significant recession" next year, a recession so deep it would cost two million americans their jobs. as we continue our coverage of the economic impact of the fiscal cliff, we focus on the tax breaks that expire at the end of this year. darren gersh takes a look at what it all could mean for your paycheck. >> reporter: no matter who is elected in november, at least one tax break that's propping up spending looks likely to expire on january one: the payroll tax cut. that alone will take roughly $85 billion out of consumer wallets next year. >> i don't think either party feels like they're getting a lot of credit for it. a lot of the political debate is on income tax cuts that started back in 2001, and as result its just not getting a lot of attention. >> reporter: but congress is working to extend other, more popular tax breaks. the senate finance committee has already voted on a plan to
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extend the research and development tax credit and other breaks for business. the senate finance bill also tweaks the alternative minimum tax to make sure it doesn't snare millions of taxpayers. congress has often passed a.m.t. fixes like that at last-minute. >> i'm pretty sure one thing they'll deal with by dec 31 is the effects of the a.m.t. so it doesn't effect every middle class taxpayer you can think of. that would be the largest tax increase on middle class taxpayers in us history. >> reporter: take out the payroll tax cut and relief from the alternative minimum tax and the remaining fiscal cliff looks less steep. what's left are the bush tax cuts, including the child tax credit and lower tax rates on dividends and capital gains. tax experts say there is a strong chance people will see all those tax breaks-- $108 billion worth-- expire at the end of the year. >> really the economic hit of that will depend on what they ultimately think is going to happen if they believe congress is going to fix it after the fact, you'll have less economic
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effect. where, if they really feel they have gone over the cliff, it will be larger. >> reporter: which brings up another twist. if they go over the edge and let many popular tax breaks expire, there's a good chance congressional leaders will promise to make any fiscal cliff tax fixes they eventually pass, retroactive to the beginning of the year. >> it's a crazy way to think about doing things. it would be a disaster for businesses. you are going to see owners having to figure out how do i take money out to pay my estimated taxes. can i assume retroactivity? more importantly for people who have withholding, the withholding kicks in and it's very hard to retroactively adjust withholding. >> reporter: how long it takes congress to act will determine whether the tax hit from the fiscal cliff is just a mild headache for accountants or a serious economic migraine. darren gersh, "n.b.r.," washington. >> tom: we continue our coverage of the fiscal cliff tomorrow. we talk with the men who led president obama's deficit
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reduction commission, former senator alan simpson and erskine bowles, about the threat of the cliff. and we'll see the latest new home sales data, and talk housing with analyst megan mcgrath. >> susie: in this back to school season, some advice, and warnings, for kids heading off to college. here's neale godfrey, founder of the children's financial network, with tonight's kids & cash. >> i cringe when i think of kids going off to college with credit cards, but they will. >> reporter: almost 85% of undergrads have cards, and they hold almost five credit cards a piece. they will graduate with an average of $4,000 in credit card debt, not counting student loan debt. instead of a credit card, encourage your college student to get a debit card, which should be connected to a joint checking account that you will oversee. teach your child to budget and make them accountable, to you, to keep track of spending. review this with them on a month-to-month basis. the next month's budget estimate will not be loaded to their account, unless they can reconcile how the money was spent the previous month.
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this is a real life lesson in budgeting. after your undergrad has proven they are responsible, they can obtain a credit card with a low limit, and hopefully start to build a good credit history. i'm neale godfrey. >> susie: the days of worrying about spilling a drink on your keyboard could soon be a thing of the past. logitech has come up with a washable keyboard. while you can't put it in the dishwasher, it is hand-washable, and can be submerged in almost a foot of water. the full-size keyboard costs about $40 and will role out first in europe this fall. >> tom: so i can type from the swimming pool, maybe. >> susie: that's nightly business report for wednesday, august 22. have a great evening everyone, and you too tom.
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>> tom: don't drink and type. goodnight susie, we'll see you online at: www.nbr.com and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> join us anytime at nbr.com. there, you'll find full episodes of the program, complete show transcripts and all the market stats. also follows us on our facebook page at bizrpt. and on twitter @bizrpt. r
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